Hopes for Senate tax bill aid partial rebound
U.S. stocks ended lower on Friday after news surrounding former national-security adviser Michael Flynn added an element of political uncertainty into markets, though the issue wasn't seen as derailing a market rally that gave the Dow its best week of the year.
Trading was volatile, with major indexes mostly opening higher, though they fell sharply in the immediate aftermath of the Flynn news. However, all three indexes clawed back losses throughout the afternoon on optimism over expectations lawmakers would make additional progress on tax-cut legislation.
Where are stocks trading?
The Dow Jones Industrial Average fell 40.76 points, or 0.2%, to 24,231.59, snapping a five-day streak of gains. The blue-chip average fell about 300 points at its low of the session.
The S&P 500 fell 5.36 points, or 0.2%, to 2,642.22. The Nasdaq Composite Index declined 26.39 points, or 0.4%, to 6,847.59.
Read: Where to stash your money when this bull market makes you sweat (http://www.marketwatch.com/story/where-to-stash-your-money-when-this-bull-market-makes-you-sweat-2017-11-30)
The Dow saw a 2.9% weekly rise, its largest since December 2016. The S&P 500 saw a 1.5% weekly gain, the biggest since September. Both the Dow and the S&P have risen in 10 of the past 12 weeks.
The Nasdaq fell 0.6% over the week, the biggest weekly decline for the index since Sept. 8. The tech-heavy index suffered its biggest one-day drop in more than three months on Wednesday, as tech stocks slumped amid portfolio rebalancing among traders.
Related:Portfolio managers are losing their enthusiasm for highflying tech stocks (http://www.marketwatch.com/story/portfolio-managers-are-losing-their-enthusiasm-for-highflying-tech-stocks-2017-12-01)
What's driving the market?
Investors reacted to Flynn pleading guilty to lying to the Federal Bureau of Investigation (http://www.marketwatch.com/story/former-trump-national-security-adviser-michael-flynn-pleads-guilty-to-lying-to-fbi-2017-12-01) and promising full cooperation with the special counsel's Russia investigation. ABC News (http://abcnews.go.com/Politics/michael-flynn-charged-making-false-statements-fbi-documents/story?id=50849354) reported Flynn is prepared to testify that President Donald Trump directed him to make contact with the Russians, initially as a way to work together to fight ISIS in Syria.
Flynn is the second member of Trump's campaign to reach a deal with the special counsel investigating Russia's alleged interference in the U.S. election. Further developments could result in heightened market volatility, even if the news isn't seen as impacting some of the economic trends that have driven markets higher over the course of 2017.
Read:Here's why the stock-market rally is unlikely to be derailed by Michael Flynn (http://www.marketwatch.com/story/why-stock-market-rally-unlikely-to-come-undone-by-flynn-news-2017-12-01)
Another issue investors are watching closely is the state of tax legislation. Senate Majority Leader Mitch McConnell said Republicans had the votes to pass the Senate tax bill, adding that a final vote will arrive at the floor "later today."
Read:Here's what's next for the Senate's tax bill (http://www.marketwatch.com/story/heres-whats-next-for-the-senates-tax-bill-2017-11-30)
Some concerns over the bill remain, including how to finance the tax cuts. On Thursday, the Joint Committee on Taxation said the Senate bill would generate more than $400 billion in revenue over 10 years through economic growth, but that's not nearly enough to compensate for the measure's $1.4 trillion cost.
What are strategists saying?
"Mike Flynn testifying against the president was one thing that the market was not pricing in whatsoever, so it's not surprising to see such a sharp knee-jerk reaction," Mike Antonelli, equity sales trader at Robert W. Baird & Co.
"What this also shows is how everyone in the market was positioned long--nobody was short. And news like this can be seen as derailing the tax cuts bill, which is what most investors want," Antonelli said.
The decline comes at a time when stocks have hit dozens of records over the course of the year, with little in the way of volatility or even minor pullbacks. Following November, the S&P 500 has risen for 13 straight months on a total-return basis, the longest such streak in its history (http://www.marketwatch.com/story/with-november-in-the-books-the-sp-500-put-another-chapter-in-its-historic-march-higher-2017-11-30).
"Although today's Washington drama could cause some near-term volatility, the overall economy is on very firm footing and we don't expect this to lead to a major dip," said Ryan Detrick, senior market strategist at LPL Financial. "At the same time, a record 13 months in a row of gains for the S&P 500 (when including dividends) and the longest streak ever without a 3% correction (http://www.marketwatch.com/story/sp-500-is-poised-to-make-uncanny-stock-market-historyfor-doing-almost-nothing-2017-10-12) makes the odds of a normal pullback quite high."
What's on the economic docket?
The Markit manufacturing purchasing managers index for November fell to 53.9 from 54.6 in October. The ISM manufacturing reading (http://www.marketwatch.com/story/us-manufacturers-roar-ahead-ism-shows-2017-12-01)dipped to 58.2% in November from 58.7% in October.
What stocks are moving?
Industrial stocks were the biggest decliners of the day, off 1.2%, while technology shares fell 0.6%.
Energy traded to the upside, rising 0.8%. Among energy's notable outperformers, Halliburton Co(HAL) rose 3.1%, while Schlumberger NV(SLB) rose 3%.
The sector was supported by a rise in the price of crude oil, where prices advanced (http://www.marketwatch.com/story/oil-prices-build-on-gains-after-opec-agreement-to-extend-production-curbs-2017-12-01) after major oil producers, as expected, hammered out an agreement to extend ongoing production curbs through 2018.
Mylan NV(MYL) shares jumped 4.4% after a CNBC report on Thursday that Amazon.com Inc. (AMZN) was holding preliminary talks with generic drugmakers (http://www.marketwatch.com/story/amazon-has-discussed-pharmacy-business-with-generic-drugmakers-report-2017-11-30)--including Mylan and Novartis AG(NOVN.EB) (NOVN.EB) unit Sandoz--as it contemplates entering the pharmacy business.
Some heavily-weighted tech stocks continued to weaken. Shares of Apple Inc. (AAPL) fell 0.5%, while NVIDIA Corp. (NVDA) slid 1.5%. Separately, consumer discretionary giant Amazon.com Inc.(AMZN) dropped 1.2%.
Shares of General Motors Co. (GM) fell 0.7% after the car maker reported monthly sales in the U.S. fell by 2.9%, with declines in all brands. Ford Motor (F) rose 0.5%.
Shares of Blue Apron Holdings Inc.(APRN) climbed 8% after the struggling meal-kit maker late Thursday installed Chief Financial Officer Brad Dickerson as chief executive (http://www.marketwatch.com/story/blue-apron-installs-new-ceo-as-post-ipo-doldrums-continue-2017-11-30), pushing out co-founder Matthew Salzberg.
Read:'It made us look bad': Pharma CEOs clash over Allergan patent move (http://www.marketwatch.com/story/it-made-us-look-bad-pharma-ceos-clash-over-allergan-patent-move-2017-11-30)
What are other markets doing?
Asian markets closed mixed (http://www.marketwatch.com/story/asian-markets-reverse-course-give-up-early-gains-2017-11-30), while European stocks declined.
Gold prices rose 0.5%. The ICE Dollar index dropped after the Flynn news, trading 0.2% lower. The yield on the 10-year Treasury note fell 4.7 basis points to 2.36%.
(END) Dow Jones Newswires
December 01, 2017 16:24 ET (21:24 GMT)